In a stark declaration of financial distress, SK On, a prominent South Korean electric vehicle (EV) battery manufacturer, has reported significant challenges as its key markets in Europe and the US grapple with sluggish EV sales.
According to a recent report from the Financial Times, SK On, ranked as the world’s fourth-largest EV battery maker after Chinese giants CATL and BYD, as well as South Korean rival LG Energy Solution, has incurred losses for ten consecutive quarters since its spin-off from the parent company in 2021. During this period, its net debt has skyrocketed from Won2.9tn ($2.1bn) to Won15.6tn, underscoring the severity of its financial woes.
Facing this grim reality, SK On's CEO, Lee Seok-hee, has implemented emergency measures including stringent cost-cutting initiatives and operational adjustments. In a letter addressed to employees, Lee emphasized the urgent need for collective effort, stating, “We have our back against the wall.”
Amid discussions within the SK Group conglomerate, a potentially transformative solution is being explored: merging SK On's parent company, SK Innovation, with SK E&S, the group's profitable energy affiliate specializing in liquid natural gas production. This proposed merger is expected to be deliberated at the upcoming board meetings this month.
SK On had previously made substantial investments in the US and Europe, anticipating a surge in EV demand that has yet to materialise. Recent developments include extended layoffs at its Georgia plant and the postponement of a second facility launch in Kentucky, which is a joint venture with its principal US client, Ford.
While Chinese companies CATL and BYD continue to dominate the global battery industry with a combined market share of 53.2%, South Korean firms like LG, SK, and Samsung SDI, alongside Japan's Panasonic, are poised to capitalise on growth opportunities in Western markets, the FT report added.
Efforts to safeguard these markets from an influx of Chinese batteries, led by initiatives in Washington and Brussels, have presented a window of opportunity for non-Chinese battery manufacturers in the US, including SK On, which has benefited from substantial subsidies under President Joe Biden’s Inflation Reduction Act.
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